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Consider the economies of Kimberlei and Clarkistan, which are identical except that the multiplier in Kimberlei is smaller than that in Clarkistan.
This means that Kimberlei's GDP is _______ Clarkistan's GDP to fluctuations in the components of total spending.
a. less sensitive than
b. equally sensitive as
c. more sensitive than
Features of the economy that reduce its sensitivity to shocks are called automatic stabilizers.
Suppose again that the economies of Kimberlei and Clarkistan are identical except that Kimberlei has instituted personal income tax, whereas Clarkistan hasn't.
Clarkistan's economy is (more, less) sensitive to fluctuations in GDP than Kimberley's economy. This is because the personal income tax has ( increases or reduced) Kimberlei's multiplier.

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codedmog101

Answer:

(a). Option 1 => less sensitive than.

(b). More.

(c). Reduced.

Explanation:

Ok, let us fill in the gap in the question above. Note that the capitalized words are the missing words in the question;

"Consider the economies of Kimberlei and Clarkistan, which are identical except that the multiplier in Kimberlei is smaller than that in Clarkistan.

This means that Kimberlei's GDP is LESS SENSITIVE THAN Clarkistan's GDP to fluctuations in the components of total spending."

There are three parts to this question and the first answer is LESS SENSITIVE THAN(option 1) because whem multiplier is less, change in GDP is less too.

Tye answer to the second part is MORE because when we have personal income tax, the disposable income decreases and spendings also decreases and this in turn causes MORE sensitivity to fluctuations in GDP(increase in MPS).

For the third part, the answer is REDUCED because of the Increament in MPS

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